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CNY

Dollar Steadies As Rate Cut Consensus Falters

Markets look set for a consolidative session as North American traders return to their desks after a long weekend. Equity futures are pointing to a modestly-negative open, ten-year Treasuries are yielding 4.27 percent, slightly below Friday’s close, and most major currency pairs are settling into ranges established earlier in the month.  The dollar is up almost 2.5 percent on a year-to-date basis after last week’s higher-than-expected consumer and producer price releases triggered a crisis of confidence among investors who had been betting on an imminent and inexorable easing cycle from the Federal Reserve. Overnight index swaps are pointing to 90...

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Hold the line

• Holiday trade. Minimal moves with the US on holiday. European equities consolidated, while the major currencies remained range bound.• USD trends. ECB wage indicator & Canadian CPI tonight. US Fed commentary in focus later this week with markets now pricing in little chance of a March cut.• AUD drivers. February minutes released today & wage data due tomorrow. Signals from China suggest spending was positive during Lunar New Year. With the US closed for Presidents Day and newsflow limited there were minimal market moves overnight. European equities consolidated with the EuroStoxx600 (+0.2%) making its way up towards its January...

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Fed speak on this weeks radar

• Diverging markets. US yields rose & the S&P500 dipped after US producer prices exceeded expectations. However the USD eased. AUD at ~$0.6530.• Holiday data. High frequency data & reports suggest Chinese spending & travel exceeded pre-COVID run-rates. Is the tide finally turning?• Event radar. Locally, Q4 wages is due (Weds). US Fed commentary in focus with several members speaking later in the week. Eurozone PMIs released (Thurs). Markets consolidated on Friday night. In contrast to the Japanese Nikkei which touched another multi-decade high US equities unwound the modest gains from the previous day (S&P500 -0.5%) with higher bond yields...

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US inflation jolts markets

• US inflation. A positive US inflation surprise rattled markets. US bond yields jumped up, equities fell, & the USD strengthened. AUD back down near ~$0.6450.• Rate pricing. Odds of a Fed rate cut in March or May have tumbled. Markets are now (finally) factoring in a similar path forward to the Fed’s ‘dot plot’.• AU events. The next AUD centric event is tomorrows labour force report. Will employment rebound from its December slump or will the cracks widen? The latest read on US inflation rattled markets overnight. US CPI positively surprised pretty much all the analysts surveyed with headline...

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US inflation & AU jobs in focus

• Positive tone. The lack of meaningful revisions to the US CPI seasonal factors supported sentiment. US equities hit another record. The AUD edged up.• US focus. US CPI & retail sales this week. Inflation projected to slow with headline CPI set to slip below 3%pa. This may take some of the heat out of the USD.• Event radar. AU jobs report released Thursday with employment forecast to rebound. RBNZ Gov. Orr speaks. UK GDP & CPI also due this week. An upbeat tone across markets on Friday with participants and Federal Reserve policymakers breathing a sigh of relief that...

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